We find evidence of substantial pre-announcement informed trading
in equity index and Treasury futures markets for seven out of 21
market-moving U.S. macroeconomic announcements. About 30
minutes before the release time, prices begin to drift in the
direction of the market’s subsequent reaction to the
news. This drift accounts for 49 percent and 39 percent
of the overall price adjustments in the E-mini S&P 500 and
10-year Treasury note futures markets, respectively, and the
estimated magnitude of profits of informed traders underscores
the economic significance of these price moves.

The ECB team — Alexander Kurov, Alessio Sancetta, Georg
Strasser and Marketa Halova Wolfe — analyzed market movements
around the releases of 30 data points ranging from the ISM
Manufacturing Index to the jobs report to Existing Home Sales.

The biggest market movements, the ECB argued, are those that
occur when a data point "surprises" investors. So, using the
Bloomberg consensus forecast, the researchers looked at price
drifts on the second-by-second S&P 500 market leading up to
the release of significant "surprises" or data points that
varied greatly from those consensus forecasts.

According to their data, nearly half of the market move due
to an economic surprise occurs before the release of that data.

The ECB paper suggests two possible causes for early access to
data: information leakage and superior forecasting.

The information leakage hypothesis suggests that people
who receive the information during a "lock-up" period before
the official release are getting the information out early. This
is essentially the nefarious option.

On the other hand, said the paper's authors, it may just be that
some market watchers are better than others at predicting the
data and are making large, correct trades on publicly
available information.

"Some of the superior forecasting ability may be based on smart
reprocessing of publicly available data," said the researchers.

"Superior forecasts of the announcement surprises may also be
generated by 'digging deeper' into pre-packaged information
products, for example, by using forecasts by individual
professional forecasters instead of the Bloomberg consensus
forecast. Further improvements in forecasting may be due to
resource-intensive legwork creating original proprietary datasets
that proxy the data underlying public announcements."

Either way, the ECB research shows that much of the profit to be
made by a surprising data release is captured prior to the
actual data coming out. Whether this is caused by
intentional leaks or just better forecasters beating the market
is up for debate.